The US Financial Accounting Standards Board
(FASB) has issued an exposure draft to simplify the requirements
for an entity to test goodwill for impairment.
The update was drafted in response to
non-public companies expressing concern over the cost and
complexity of performing the goodwill impairment test.
“The proposals contained in this update are
intended to address those concerns and to simplify and improve the
process for public and nonpublic entities alike.” FASB member Daryl
The amendments in this update would allow an
entity to first assess qualitative factors to determine whether it
is necessary to perform the two-step quantitative goodwill
“Under the proposed amendments, an entity
would not be required to calculate the fair value of a reporting
unit unless the entity determines, based on a qualitative
assessment, that it is more likely than not that its fair value is
less than its carrying amount,” the FASB said.
If approved, the amendments in the proposed update would be
effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after 15 December 2011, with
early adoption permitted.
The exposure draft is available for comment until 6 June.